Financial crisis: Big banks bail out First Republic Bank

Eleven major financial institutions deposited $30 billion to guarantee their solvency.

The big banks have come together and deposited 30 billion dollars in First Republic Bank to prevent its bankruptcy. In a joint statement, the U.S. economic authorities stressed that "this show of support from a group of major banks is very welcome, and demonstrates the resilience of the banking system." On the same day, Treasury Secretary Janet Yellen insisted on the Senate floor that "our banking system is sound, and Americans can trust that their deposits will be there when they need them."

According to The Wall Street Journal, sources close to the deal said JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp. and Wells Fargo & Co. were in talks to each deposit $5 billion of equity in First Republic. In addition, Morgan Stanley and Goldman Sachs Group Inc, as well as the regional banks U.S. Bancorp, PNC Financial Services Group Inc, and Truist Financial Corp. were going to contribute smaller amounts, according to the same sources.

First Republic Bank's shares rose after the announcement.

Although the details are still being finalized, the same sources indicate the banks participating in the bailout will use the deposits they have received in recent days from frightened customers who withdrew their savings from the intervened banks and other small and medium-sized financial institutions, such as First Republic.

First Republic shares had been suffering a severe setback for days, falling 61.8% last Monday. On Thursday, its shares fell sharply (almost 20%) at the beginning of the session due to investor fears about the global financial situation. Following the announcement of the big banks' move, the trend was reversed and First Republic shares ended up rising by 5% before the end of trading.